Politics

National Security

Business

Environment

Juvenile Justice

Health

The Center for Public Integrity used American Public Media’s Public Insight Network to help report this story. You can help inform our investigative reporting by adding your expertise to the Network. Join the more than 90,000 people around the country who are sharing their knowledge with our reporters and other partner newsrooms. Sign up here.

August 2, 2011

The death blow for Michael Dalrymple’s Phoenix eco-friendly building supply company was the credit freeze that paralyzed the banking system and the nation in the fall of 2008.

“Once the economy melted down, 70 percent of my business evaporated overnight,” Dalrymple said. “Customers who would use a home equity line of credit to retrofit their homes were told by their banks that they didn’t have that credit anymore.”

His business, called a.k.a Green, held on a little longer, but closed its doors for good in 2009.

Dalyrmple said he blames the big banks and their political enablers for credit freeze that killed his business. “It was extremely frustrating as an entrepreneur looking to be in charge of my success or failure to come to the realization that the fate of my business was determined by greed, corruption and illegal behavior on Wall Street and in Washington,” he said.

It took more than two years, but Dalrymple will soon extract his own very small measure of revenge.

He is cutting ties with JPMorgan Chase & Co., his longtime lender, and moving all of his banking assets to a regional Arizona bank with no link — as far as he knows — to the financial crisis. In doing so, he will join a growing number of consumers whose anger at Wall Street over the financial crisis, subsequent $700 billion bailout, and consumer credit practices seen as predatory or unfair has pushed them to close accounts with major banks most associated with the crisis.

These opt-outs were identified through the Public Insight Network, a group of thousands of people across the United States who have agreed to help Center journalists and American Public Media partner newsrooms by describing their personal experiences. They are not necessarily the customers the banks want to lose.

Dalrymple soon found a job working on an environmental retrofit project at an Arizona university. Others who said that they were pulling their business from major banks are teachers, computer programmers, and retirees with comfortable financial cushions. Many have good credit, stable jobs, and own their own homes.

As a group, they are disillusioned with the financial industry, and aren’t sure if the Consumer Financial Protection Bureau, which is due to go online this summer, will serve as a meaningful check on Wall Street power.

“I’m not a fanatic that thinks that all big corporations and banks and the people in them are bad,” Dalyrmple said. “But I’m realizing I have choices, and even if some of those take more work, it might be worth the change.”

Soaring Interest Rates, No More Free Checking

How many bank customers have fired their bank as an act of protest?

A Zogby Interactive poll from last year found 9 percent of U.S. adults have taken at least some of their business away from a large bank.

Dennis Santiago, an analyst at Institutional Risk Analytics, which provides market data to banks, said that consumers moved about 1 percent of total deposits from large to small financial institutions in the first nine months of 2010.

Santiago attributes the migration partly to the liberal-leaning group Move Your Money, which advocates for customers of big banks to move their accounts to small banks and credit unions. (Santiago has penned articles for the group, which is backed by Arianna Huffington).

The Center’s reporting, which included sorting though several hundred responses to an online survey about credit cards and the Dodd-Frank financial regulation law, turned up more than a dozen people who said they have opted out of the mainstream financial system or plan to do so soon.

These respondents come from different economic and geographic backgrounds. Politically, more self-identified as Democrats than Republicans, though there were also many Libertarians and independents. Their stories, though, shared some commonalities.

Most said they hadn’t given much thought to their banking choice prior to the financial collapse. For some, the tipping point was a sense that Wall Street wasn’t being held accountable for its role in the economic collapse. For others, the spark was new fees and higher interest rates that have come even as banks recorded big profits.

Last Friday, JPMorgan Chase reported that its net profit leapt 48 percent to $17.4 billion in 2010. On Tuesday, Citigroup Inc. said that it notched a $10.6 billion profit for the year, compared with a $1.6 billion loss in 2009. Goldman Sachs and Wells Fargo will report earnings on Wednesday, followed by Morgan Stanley and Bank of America Corp. later in the week.

For Philip Harris, a special education teacher and operator of a small online publishing press in Summerville, Maine, it came down to the special treatment banks received during the 2008-09 financial crisis. The banks got a bailout. He and his neighbors did not.

“Rather than bail out the people who bore the brunt of the problem, the government bailed out the people who caused it,” Harris said. “So we said ‘the hell with it.’ We are not going to finance these people any more.”

Harris moved his assets from Bank of America to a local credit union and uses a debit card for most purchases.

But not every consumer can join a credit union, and many small banks have also engaged in practices that watchdog groups describe as unethical.

Travis Plunkett, the legislative director for the Consumer Federation of America, notes that small banks invented some of the more notorious anti-consumer practices, like bank payday loans.

Small banks also took bailout money from taxpayers, and, in contrast with their large brethren, have been slow to pay it back.

Of the 690 small banks with assets under $100 billion that took Troubled Asset Relief Program dollars, less than 10 percent had repaid the money as of July, according to a report from the Congressional Oversight Panel when it was headed by Elizabeth Warren. Fifteen percent had missed at least one dividend payment on the government loan, and many others were having trouble raising capital.

JP Morgan Chase, Bank of America, and Wells Fargo & Co. have completely repaid the government. Citigroup repaid $20 billion and the government received equity in the bank for the rest of the loan.

These banks did not respond to Center requests for comment.

Cutting Bank Ties Not Easy

However angry customers may be with Wall Street, the big banks still have the upper hand.

Account holders with smaller balances may find that their bank won’t let them close an account if there is any dispute over a fee. Moving a mortgage, too, can be a time consuming and expensive proposition.

One congressman, Rep. Brad Miller, a Democrat from North Carolina, is working on legislation that would make shifting accounts from one bank to another easier. Miller told the Center that the legislation would “definitely” be introduced this year, though its prospects in a Republican-led House are uncertain.

Banks, on the other hand, can dismiss customers with ease — and have done so in huge numbers since the financial collapse. In the past year alone, banks culled more than eight million credit card customers deemed risky or unprofitable.

Meanwhile, customer deposits held by the biggest banks with more than $65 billion in assets have actually inched up slightly over the past two years, a trend partly attributable to the fact that consumers are saving more.

Given the odds stacked against their actions causing meaningful change, it wouldn’t be surprising for customers to give up. But those who spoke to the Center said they consider what they are doing a small, personal protest, and that they will follow through even if they are the only ones who do so.

Thomas Lehman, a retired University of North Carolina professor, said his father was a home-town banker for 52 years, and would have been sickened by the actions taken by the banks before and after the financial meltdown.

Lehman is shifting his banking from Bank of America, likely to a local credit union. His stand is “based purely on principal,” he said.

“Our exodus will make only an infinitesimal difference to BofA, but it’s the one thing we can do to deal with the banking crisis of the past two years.”

Banks Try to Make Nice with Customers

While analysts agree that the dollar value of the money moving away from the large banks is unlikely to hurt their bottom line, some say that the movement nevertheless is being felt in the financial community.

Santiago, from Institutional Risk Analytics, said a few billion dollars in new deposits means a lot to small and regional banks, many of which are still struggling.

Large banks are also making more of an effort to reach out to customers — greeting customers as they walk in the door, localizing bank branches to reflect the values of a community, and providing more personal service, moving away from a trend toward automation.

In the past year, Vikrim Pandit, the chief executive of Citigroup, the parent of Citibank, has said that the first pillar of his bank’s new “responsible finance” governing mandate is ensuring that customers are treated responsibly.

But for customers like Stephanie Schanda, who saw the interest rate on her Citi Mastercard leap from 5.25 percent to 18 percent; Silver Persinger, whose low introductory rate will jump to 23.99 percent next year; and Samantha Vuignier, whose free bank checking account was changed to one with a $7.50 monthly fee — the promise rings hollow.

These bank customers make up the much larger pool of consumers who are angry at the banks for practices they perceive as unfair, but haven’t made a wholesale move away from their financial institution.

Vuignier, for example, closed her Citi checking account in favor of a local bank that offered free checking, but still holds five major credit cards.

Many feel trapped under the weight of existing debt, and can’t move.

This group includes Christine Acosta, a 27-year-old barista in Portland, Ore. who is struggling to make ends meet. Acosta told the Center she cut up all her credit cards and left her bank to open an account with a regional credit union. “Following three years of hidden fees, rate increases, and fine print, I finally had enough,” she said.

But she hasn’t disengaged entirely. She has about $1,000 left to pay off on a Bank of America Visa card before she can declare herself Wall Street-free.

Acosta, who has a college degree, hopes to rejoin the white collar workforce when the recession eases. But she said even if her finances improve, she will never again bank with Bank of America or another large bank.

“I just can’t trust them,” she said.

Editor's note: Late last year, The Center for Public Integrity merged with the Huffington Post Investigative Fund, which was chaired by Arianna Huffington.